Today’s high-impact economic events include the European Central Bank’s (ECB) interest rate decision, followed by the US Producer Price Index (PPI) and unemployment claims data. In the EURUSD chart analysis, a bearish reversal pattern has emerged after the currency pair failed to maintain its upward momentum. Key support levels are identified at 1.09470, 1.08167, and 1.06083, while resistance levels include 1.10867 and 1.11539. On the fundamentals side, the ECB is expected to cut rates by 25 basis points. Fundamental concerns for the ECB include persistent inflation, especially in services, and slowing economic growth. The US Federal Reserve’s rate decisions may further influence ECB policy.
Thursday 15:30 (GMT+3) – Europe: ECB Interest Rate Decision (EUR)
Thursday 16:30 (GMT+3) – USA: PPI m/m (USD)
Thursday 16:30 (GMT+3) – USA: Unemployment Claims (USD)
After reaching the high price of 1.12000, the EURUSD price chart showed signs of weakness from the bulls in maintaining the upward trend. Specifically, the formation of the bearish Japanese candlestick pattern known as Bearish Tower indicated the bulls’ inability to sustain the upward momentum. As a result, the currency pair formed a bearish reversal on the price chart, known in technical analysis as a failure swing. Specifically, the peak at 1.11539 failed to surpass the previous peak, and subsequently, prices dropped below the trough of 1.10251, hence the failure swing. The 20-period Exponential Moving Average (EMA), the Momentum oscillator, and the Relative Strength Index (RSI) all support the bearish outlook. In particular, prices are below the 20-period EMA, the Momentum oscillator, and the RSI record values below the 100 and 50 baselines, respectively. However, prices remain above the 50-period EMA. By using the Fibonacci Retracement tool on the failure swing, we can estimate three support levels: 1.09470, 1.08167, and 1.06083.
Should the bulls take market control, traders may direct their attention toward the four potential resistance levels below:
1.10867: The initial resistance is set at 1.10867, representing the weekly Pivot Point (PP) calculated using the standard Pivot Points method.
1.11539: The second price target is identified at 1.11539, corresponding to the swing high formed on September 6.
1.12000: The third target is established at 1.12000, aligning with the daily high recorded on August 26.
1.12772: An additional price target is estimated at 1.12772, corresponding to the weekly resistance (R3) calculated using the standard Pivot Points method.
Should the sellers maintain market control, traders may consider the four potential support levels listed below:
1.09470: The first price target is identified at 1.09470, corresponding to a peak marked on July 17 and coinciding with the 161.8% Fibonacci Extension drawn from the swing low of 1.10251 to the swing high of 1.11539.
1.08908: The second support is established at 1.08908, aligning with the weekly support (S3) calculated using the standard Pivot Points method.
1.08167: The third line of support is set at 1.08167, representing the 261.8% Fibonacci Extension drawn from the swing low of 1.10251 to the swing high of 1.11539.
1.06651: An additional downward target is observed at 1.06651, reflecting the trough marked on June 26.
Today, it is anticipated that the European Central Bank (ECB) will lower interest rates by 25 basis points to 3.5% which would be the second decrease this year following a pause in July. While inflation in the eurozone has decreased to 2.2%, core inflation, especially in the services sector, remains high at 2.8%, driven by wage increases. This persistent inflation, particularly in services, continues to concern ECB officials, making them hesitant to outline future rate-cutting plans.
ECB President Christine Lagarde may provide some insights, though analysts predict little guidance on future moves. While some expect further rate cuts by December, potentially lowering rates to 2.5% by next year, hawkish members like Isabel Schnabel and Joachim Nagel caution against cutting too quickly before inflation is fully under control. Economic growth is another concern, with slowing momentum seen in recent data.
The US Federal Reserve’s upcoming rate cuts could influence ECB decisions, potentially prompting a larger rate cut in October if the euro strengthens against the dollar. However, underlying inflation and rising service prices remain significant challenges for the ECB’s long-term policy strategy.
In conclusion, today’s high-impact economic events, particularly the ECB’s anticipated rate cut and key US economic data, will play a crucial role in shaping market dynamics. The bearish outlook for EURUSD, supported by technical indicators and chart patterns, suggests potential further declines. As the ECB navigates persistent inflation and slowing growth alongside the US Federal Reserve’s upcoming rate decisions, market participants will closely monitor how these factors influence future monetary policy and price movements.
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